WASHINGTON — Federal Reserve Board Chair Janet Yellen said Thursday that she is willing to reject any of the largest banks' resolution plans that regulators received earlier this month if they are not adequate, but in at least one respect they already appear to be improved.

Speaking before the Senate Banking Committee in the second day of her semiannual monetary policy testimony, Yellen said that she the Fed has clearly communicated the areas in which banks must improve in order to have their living wills deemed "credible." She said that after the review is complete — likely sometime early next year — she stands willing to declare any bank's resolution plan "not credible" if it is not up to snuff.

"We are certainly prepared to make those determinations," Yellen said. "We will work jointly with the FDIC as we have been doing to analyze the living wills and see whether or not we feel that the responses to the directions that we gave to these firms are satisfactory or not. And if we find that they're not, we certainly are prepared to say they are not credible."

Still, Yellen said that in one area concerning banks' public submissions of their living wills, there has already been improvement.

"We've instructed them to enhance their disclosure in the public part of the documents that they produce, and it looks like the preliminary read suggests that they have made progress there," she said. "We're going to be evaluating them in the coming months, and we have indicated that if we continue to see shortcomings in the living wills, we will use our authority to determine that these resolution plans don't meet Dodd-Frank requirements."

The Dodd-Frank Act requires any banks with more than $50 billion in assets to submit a living will to the Fed and the Federal Deposit Insurance Corp. The plan has to demonstrate how the bank would be resolved "in an rapid and orderly fashion" through bankruptcy, thus proving that it could fail without taking the rest of the economy down with it or requiring taxpayer bailouts. If both the FDIC and Fed decide that the plans are not credible, they have the authority to force the banks to divest certain problematic affiliates or otherwise streamline their operations — an outcome that the banks are loathe to consider.

Many of the largest and most complex banks — including Bank of America, Citi, JPMorgan Chase and Goldman Sachs — have already submitted plans regulators found wanting. Last year the FDIC said 11 banks plans were not credible, but the Fed did not follow suit. It gave them instructions on how to improve their plans in time for this year's July 1 submission deadline.

Sen. Elizabeth Warren, D-Mass., cited JPMorgan's more than 3,000 legal entities as an indication that the firm could not be wound down quickly.

"I just want to be clear, you're willing to say 'not credible' if they don't meet the legal standard that they could quickly be resolved, and that includes how complex their structure is?" Warren said.

Yellen declined to commit, saying that while banks have already been instructed to reduce their complexity, a simple count of affiliates is not the only metric to consider.

"Agreed that they need to be less complex, and we've given them that direction," Yellen said. "I don't want to determine this by a count of legal entities."

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